Smt. Meeta Gutgutia, New Delhi V. DCIT, New Delhi

ITA 2413/DEL/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6308 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 28-03-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 21-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIRUPAMA KOTRU
• Keywords: Search and seizure; Loose papers
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI R.S. SYAL, AM & MS SUCHITRA KAMBLE, JM ITA NO.2413/DEL/2012 ASSESSMENT YEAR : 2004-05 MEETA GUTGUTIA, PROP. M/S FERNS N PETALS, ME-I, M-BLOCK MARKET, GREATER KAILASH PART-I, NEW DELHI. PAN : AFDPG2774B VS. DCIT, CENTRAL CIRCLE-10, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJESH JAIN, CA RESPONDENT BY: MS NIRUPAMA KOTRU, CIT, DR DATE OF HEARING : 28.03.2017 DATE OF PRONOUNCEMENT: 28.03.2017 ORDER PER SHRI R.S. SYAL, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 14.03.2012 IN RELATION TO THE ASSESSMENT YEAR 2004-05. 2. IT IS A RECALLED MATTER INASMUCH AS THE EARLI ER EX PARTE ORDER PASSED BY THE TRIBUNAL WAS RECALLED BY ITS LATER ORDER DATED 15.11.2016. ITA NO.2413/DEL/2012 2 3. THE LD. AR PRESSED ONLY TWO GROUNDS, NAMELY, 2 A ND 3. THE REMAINING GROUNDS, NAMELY, 1, 4 AND 5 ARE, THEREFOR E, DISMISSED AS NOT PRESSED. 4. GROUND NO. 2 IS AGAINST UPHOLDING THE ADDITION O F RS.2,41,541/- OUT OF TOTAL ADDITION OF RS.14,49,246/- MADE BY THE ASSESS ING OFFICER ON THE BASIS OF ANNEXURE A-5. SUCCINCTLY, THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF SALE OF FLOWERS AND RELATED PRODUCTS LIKE BOUQUET T HROUGH ITS VARIOUS FRANCHISEE OUTLETS. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON THE ASSESSEE U/S 132 OF THE ACT ON 23.12.2005. CERTAIN INCRIMINATING DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH. ANNEXURE A-5 IS A BUNCH OF LOOSE PAPERS, WHICH WAS SEIZED DURING THE COURSE OF SEARCH. AS PER PAGES 14-39 OF THIS ANNEXURE, CLOSING STOCK AS ON 31.03.2004 IN RESPECT OF THE PREMISES AT VASANT VIHAR WAS WORKED OUT AT R S.3,41,491/-. AS AGAINST THIS, THE DECLARED CLOSING STOCK WAS ONLY T O THE TUNE OF RS.99,950/-. ON BEING CALLED UPON TO EXPLAIN THE DIFFERENCE IN T HE TWO FIGURES, THE ASSESSEE CONTENDED THAT THE VALUATION OF CLOSING ST OCK AT RS.3,41,491/- WAS DONE AS PER TAG PRICE AND FOR THE PURPOSES OF ACCOU NTS, THE ASSESSEE WAS VALUING STOCK AT COST OR TAG PRICE, WHICHEVER IS LE SS. THE AO DID NOT ACCEPT ITA NO.2413/DEL/2012 3 THIS EXPLANATION. HE NOTED THAT THE DIFFERENCE IN TWO VALUES WAS FOUND ONLY IN RESPECT OF VASANT VIHAR BRANCH. AS THE ASSESSEE WAS RUNNING SIX OUTLETS IN TOTAL, HE MADE AN ADDITION OF RS.14,49,246/- TAK ING THE SAME BASIS OF UNDISCLOSED CLOSING STOCK FOR VASANT VIHAR BRANCH. THE LD. CIT(A) DELETED THE ADDITION IN RESPECT OF OTHER FIVE OUTLETS. HE, HOWEVER, SUSTAINED THE ADDITION AT RS.2,41,541/-, BEING THE DIFFERENCE BE TWEEN THE VALUE OF STOCK AS ON 31.3.2004 AS FOUND DURING THE COURSE OF SEARC H AND AS DECLARED FOR THE PURPOSES OF INCOME-TAX. THE ASSESSEE IS AGGRIEVED AGAINST THE SUSTENANCE OF THIS ADDITION. 5. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD, IT IS NOTICED THAT DURING THE COURSE OF SEARCH CERTAIN LOOSE PAPERS WERE FOUND INDICATING VALUE OF STOCK AS ON 31.03.20 04 AT RS.3,41,491/-. ITEM-WISE DETAIL OF STOCK AND ITS VALUE HAS BEEN PL ACED ON RECORD. THE ASSESSEE SOUGHT TO EXPLAIN THE DIFFERENCE BETWEEN T HE VALUE AS DISCLOSED AND THE VALUE AS PER THE SEIZED MATERIAL BY CONTENDING THE FORMER TO BE ON COST PRICE AND THE LATER ON TAG PRICE. WE HAVE EXAMINED THE LOOSE PAPERS FOUND DURING THE COURSE OF SEARCH, WHICH DO NEITHER MENTI ON NOR INDICATE EVEN REMOTELY THAT THE VALUE GIVEN THEREIN WAS THE TAG P RICE. THE LD. AR FAILED TO ITA NO.2413/DEL/2012 4 BRING ON RECORD ANY EVIDENCE WORTH THE NAME TO SUBS TANTIATE HIS EXPLANATION. NO PURCHASE VOUCHERS HAVE BEEN PRODUC ED BEFORE US TO SHOW THAT THE PRICE GIVEN IN THE LIST FOUND AT THE TIME OF SEARCH WAS REFERRING TO THE PURCHASE PRICE AND NOT THE TAG PRICE. IN THE AB SENCE OF ANY CORROBORATION OF THE ASSESSEES STAND, WE ARE INCLINED TO UPHOLD THE ADDITION MADE BY THE ASSESSING OFFICER, AMOUNTING TO RS.2,41,541/-. THI S GROUND IS NOT ALLOWED. 6. THE ONLY OTHER GROUND IS AGAINST THE CONFIRMATIO N OF ADDITION OF RS.6,73,077/- OUT OF TOTAL ADDITION OF RS.7,10,270/ - ON AD HOC BASIS. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE CLA IMED EXPENSES TOTALING TO RS.74,02,688/-. AS THE ASSESSEE COULD NOT PRODUCE B OOKS OF ACCOUNT ALONG WITH BILLS/VOUCHERS FOR VERIFICATION DESPITE SPECIF IC OPPORTUNITIES, THE ASSESSING OFFICER MADE DISALLOWANCE AT 10% OF EXPEN SES, WHICH RESULTED IN AN ADDITION OF RS.7,10,270/-. THE LD. CIT(A) REDUC ED THE ADDITION TO RS.6,73,077/- BY EXCLUDING SOME ITEMS OF EXPENSES O UT OF 10% AD HOC DISALLOWANCE, SUCH AS, BANK CHARGES, COMMISSION, DE PRECIATION, INSURANCE AND AUDIT FEES. THE ASSESSEE IS AGGRIEVED AGAINST THE SUSTENANCE OF THE REMAINING ADDITION. ITA NO.2413/DEL/2012 5 7. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELE VANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESSEE DID NOT PR ODUCE BILLS/VOUCHERS IN SUPPORT OF THE EXPENSES CLAIMED TO THE TUNE OF RS.7 1,02,688/-. UNDER SUCH CIRCUMSTANCES, THE ASSESSING OFFICER WAS LEFT OPTIO NLESS TO EXAMINE THE GENUINENESS OF THE EXPENSES CLAIMED. AS SUCH, SOME SORT OF AD HOC DISALLOWANCE WAS LIABLE TO BE MADE. THE LD. CIT(A) IN THE FIRST APPEAL, REDUCED THE SCOPE OF EXPENSES FOR MAKING AD HOC DIS ALLOWANCE. HOWEVER, WE FIND THAT THE LD. CIT(A) IN HIS ORDER FOR THE IM MEDIATELY PRECEDING ASSESSMENT YEAR, NAMELY, 2003-04, A COPY PLACED ON PAGE 17 ONWARDS OF THE PAPER BOOK, HAS RESTRICTED THE AD HOC DISALLOWANCE ONLY IN RESPECT OF ADVERTISEMENT EXPENSES, BUSINESS PROMOTION, CELLULA R EXPENSES, CONVEYANCE, MISCELLANEOUS EXPENSES, PRINTING AND ST ATIONERY, REPAIR AND MAINTENANCE, STAFF WELFARE, TELEPHONE CHARGES, TOUR AND TRAVELLING AND VEHICLE RUNNING AND MAINTENANCE. IT HAS NOT BEEN BR OUGHT TO OUR NOTICE THAT THE FINDING RETURNED BY THE LD. CIT(A) IN RESTRICTI NG THE DISALLOWANCE TO THIS LEVEL FOR THE PRECEDING YEAR HAS BEEN INTERFERED WI TH BY THE TRIBUNAL. CONSIDERING THE ENTIRETY OF THE FACTS AND CIRCUMSTA NCES PREVAILING BEFORE US, WE ARE OF THE CONSIDERED OPINION THAT IT WOULD BE J UST AND FAIR IF THE DISALLOWANCE AT 10% IS RESTRICTED TO THOSE ITEMS OF EXPENSES FOR WHICH THE ITA NO.2413/DEL/2012 6 LD. CIT(A) SUSTAINED DISALLOWANCE FOR THE ASSESSMEN T YEAR 2003-04 AS DISCUSSED ABOVE. WE ORDER ACCORDINGLY. CONSEQUENTLY , THE IMPUGNED ORDER IS SET ASIDE AND THE MATTER IS SENT BACK TO THE AO FOR COMPUTING THE DISALLOWANCE OF EXPENSES IN LINE WITH THE FINAL DEC ISION TAKEN IN THE APPELLATE PROCEEDINGS FOR THE IMMEDIATELY PRECEDING YEAR. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 8 TH MARCH, 2017. SD/- SD/- (SUCHITRA KAMBLE) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28 TH MARCH, 2017. DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI